Early last week, both the S&P and NASDAQ recorded all time highs before tumbling along with the Dow as political concerns rose. By Friday, though, the markets had largely rebounded and steadied. The S&P 500 closed the week down 0.38%, the Dow saw a 0.44% loss, and the NASDAQ reported a 0.61% decline. The MSCI EAFE reported up 0.79% for the week.

The CBOE VIX is designed to measure market volatility by using S&P 500 put and call index option prices. For most of the year, volatility in the markets has been low. However, the CBOE Volatility Index (VIX) spiked 40% midweek before falling back by week’s end, indicating a possible increase in market volatility.

Through the week’s ups and downs, investors followed some other important economic developments.

LAST WEEK’S DEVELOPMENTS:

Solid Regional Business IndexThe Philadelphia Fed Business Outlook Survey again pointed to progress in the factory sector. While the consensus range was 16.0 – 25.0, the General Business Conditions Index-Level reported 38.8.

Mixed Housing ReportsNew home sales remained strong as the housing market index rose 2 points to 70. The data came out well ahead of the 65 – 69 consensus range. However, April housing starts were lower than expected. Housing starts are now at a 1.172 million annualized rate, after falling 2.6%.

Household Debt RisesTotal household debt rose to a new high, reporting a $149 billion increase to come in at $12.73 trillion. Student loans and auto loans were major contributors to the rising debt:

Student loans now make up about 10.6% of all U.S. household debt, rising to $1.3 trillion. Comparatively, in 2003, student loans only accounted for 3.3% of total household debt.

EconomyManufacturing output rose 1.0 percent in April, the strongest monthly result in over 3 years. As such, investors will track how the rest of the second quarter shakes out. In addition, we will be interested in this week’s housing reports, hoping for a better handle on where this up-and-down sector is heading.

GeopoliticalFinancial markets could experience some headwinds as geopolitical situations fester. Concerns over North Korea and political opposition to globalization remain. In addition, Brazil is facing political disruption and a deep recession that could mean problems for companies with business interests in that country. Similarly, continuing political challenges for the Trump administration may adversely affect proposed tax reform, health-care legislation, and infrastructure initiatives.

As always, we will continue keeping abreast of market and economic updates. We encourage you to focus on your long-term financial outlook. Should you have any questions, we are happy to help.

Markets snapped their winning streak and ended the week down slightly as investors decided to take some profits off the table. The light economic calendar led to sluggish activity since investors were reluctant to commit to positions without new data to bolster their analysis. For the week, the S&P 500 lost 0.68%, the Dow fell 0.88%, and the Nasdaq slid 0.25%.[1. http://goo.gl/AjXO3V].

Geopolitics took center stage last week when Iraqi insurgents captured Mosul and Tikrit, major cities in northern Iraq, and advanced toward Baghdad. In response to the threat, the U.S. moved a carrier group into the Persian Gulf to support the government in Baghdad. Analysts are worried about how instability in Iraq might affect global oil markets. U.S. crude oil rose to nearly $105/barrel on the new security fears.[2. http://www.cnbc.com/id/101749557 ] Iraq is an important Organization of the Petroleum Exporting Countries (OPEC) producer and disruptions in regional supplies could send oil prices through the roof and throttle consumer spending.[3. http://www.cnbc.com/id/101760320]

In Ukraine, the ongoing conflict escalated when well-armed pro-Russia separatists shot down a Ukrainian military plane. Russia and Ukraine have been caught in a standoff since March, when Russia annexed Crimea. European leaders spoke with Ukrainian and Russian officials about the incident, stressing the need for a cease-fire in eastern Ukraine and a return to stability.[4. http://www.cnn.com/2014/06/14/world/europe/ukraine-crisis/] EU countries rely on natural gas supplies that pass through Ukraine, and interruptions could cause price spikes and temper much-needed economic growth in Europe.

HEADLINES:
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance and Treasury.gov. International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the DJCBP. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

Detroit bond settlement reached. Bankruptcy court mediators announced that a settlement had been reached between the City of Detroit and bondholders over the treatment of unsecured general obligation bonds. Although final details have not been released, it is likely that bondholders will receive only a percentage of their principal, though bond insurers may make up some of the difference.[8. http://www.reuters.com/article/2014/06/13/us-usa-detroit-bankruptcy-bonds-idUSKBN0EO2O820140613]

Would you pay more in taxes to fix your roads? The brutal winter has taken a toll on roads across America and federal maintenance dollars are coming up short. A recent AAA survey found that two-thirds of respondents would be willing to take a tax hike or pay more at the pump to improve roads.[11. http://www.cnbc.com/id/101750499]